Merchandise trade deficit widens in September 2023

Merchandise trade deficit widened in September 2023 due to the combined impact of relatively low export earnings and high import expenditure, compared to September 2022. The cumulative trade deficit during January to September 2023 continued to remain significantly low.

• Workers’ remittances and earnings from tourism recorded significant improvements in September 2023, compared to the corresponding period of the previous year.

• Tourist arrivals recorded over one million during the nine months of ending September 2023.

• Foreign investments in the government securities market recorded a lower net outflow during September 2023, compared to the previous months.

• Gross Official Reserves amounted to US dollars 3.5 billion by end September 2023.

• The Sri Lanka rupee exhibited some volatility against the US dollar during the month of September 2023.

Merchandise Trade Balance

The deficit in the merchandise trade account widened to US dollars 378 million in September 2023, compared to the deficit of US dollars 205 million recorded in September 2022. Meanwhile, the cumulative deficit in the trade account during January to September 2023 narrowed to US dollars 3,342 million from US dollars 4,093 million recorded over the same period in 2022. The major contributory factors for this change in the trade balance are shown in Figure 1.

Performance of Merchandise Exports

Overall Exports: Earnings from merchandise exports declined by 10 per cent to US dollars 972 million in September 2023, over the corresponding month in 2022 as well as compared to US dollars 1,119 million recorded in August 2023. Despite the increase in agricultural exports, the decline in earnings from industrial exports associated with slowing external demand, including garments, mainly contributed to this contraction in export earnings in September 2023, compared to a year earlier. Cumulative export earnings also declined by 10.1 per cent during January to September 2023 to US dollars 8,982 million, over the same period in the last year.

Industrial Exports: Earnings from the exports of industrial goods declined in September 2023, with a significant share of the decline being contributed by garments. Accordingly, exports of garments to most of the major markets (the USA, the EU, and the UK) recorded declines. Further, declines were recorded in the export of gems, diamonds and jewellery; machinery and mechanical appliances (mainly, electronic equipment); and chemical products (mainly, activated carbon), among others.